Interrelationship Of Transportation Costs And Housing

Chapter 1: Realizing Housing and Transportation’s Important Inter-Connections Increasing housing costs are challenging many American households. According to the U.S. Census Bureau, the burden of housing costs in nearly every part of the country grew sharply between 2000 and 2005.1 Affordability pressures in a growing number of large U.S. metro areas are exceeding household incomes by a factor of four or more.2 The generally accepted definition of affordability is for a household to pay no more than 30 percent of its annual income on housing. Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. An estimated 12 million renter and homeowner households now pay more then 50 percent of their annual incomes for housing, and a family with one full-time worker earning the minimum wage cannot afford the local fair-market rent for a twobedroom apartment anywhere in the United States.3 Next to housing, transportation is the second highest household cost, comprising almost 20 percent of annual household expenditures. Households who use transit more, tend to have lower overall transportation costs.4 Increased access to transit, frustration over growing traffic congestion, and rising transportation costs are helping to increase transit ridership nationally. More than 9.7 billion trips were made by public transportation in 2005. Since 1995, public transportation use has increased 25 percent. There are 3,349 mass transit stations in the U.S. today, and many regions from coast to coast are building or planning to build new rail systems or expand existing systems. Over 700 new stations are currently under development.5 Accompanying the increase in transit ridership is a growing desire for housing near transit that has spurred a new real estate trend - transit-oriented development (TOD). A 2004 survey by the National Association of Realtors reported that 60 percent of potential homebuyers would prefer to live in more mixed-use, walkable neighborhoods.6 TOD is more than simply a project next to a transit station – it includes the whole district surrounding the station, which may be comprised of several distinct components and a mix of uses, the streetscape and walking environment, and integrated design, land use and activity that support transportation choice. 1

US Census Bureau, 2005 American Community Survey, Selected Characteristics. Joint Center for Housing Studies, The State of the Nation’s Housing 2006. Harvard Joint Center for Housing: 2006. 3 U.S. Department of Housing and Urban Development, Homes and Communities Web site: http://www.hud.gov/offices/cpd/affordablehousing/index.cfm 4 Scott Bernstein, Carrie Makarewicz and Kevin McCarty, “Driven to Spend: Pumping Dollars out of our Households and Communities”, Center for Neighborhood Technology and the Surface Transportation Policy Project, 2005 5 American Public Transportation Association, 2005 Public Transportation Fact Book. 6 National Association of Realtors. 2004 American Community Survey: National Survey on Communities. Smart Growth America: Washington, DC, October 2004. 2

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Transit-oriented development fosters greater use of a transit system by supporting housing and/or commercial development within walking distance of transit stations, offering a diversity of land uses and pedestrian-oriented design. Where such development has occurred, residents use transit five times as often as those who drive to the station and non-auto mode shares are substantially higher than in neighborhoods where every trip must be made by car.7

Demand for Housing near Transit Comes from All Income Levels Roughly six million American households currently live within a half-mile of an existing fixed-guideway transit stop. A conservative estimate is that by 2030, nearly a quarter of those seeking housing, or over 16 million households, will express a demand for living near fixed-guideway transit.8 The types of households who tend to seek out TOD – singles, couples without children, the elderly and low income minority households – are also the types of households that are projected to grow the most over the next 25 years. Accommodating this market demand will require substantial effort on the part of local governments, transit agencies and developers to reframe zoning and other local regulations, identify properties near transit stations for development, and define new housing and mixed-use products. A particular challenge facing local communities is to ensure that housing built within walking distance of transit is available to households of all income levels. Neighborhoods near transit provide housing to a greater share of their region’s lower-income households. Almost half of the projected 16 million National households desiring to live near transit will come from households with incomes below 50 percent of the area median income (AMI).9 These households are particularly relevant as the need for affordable housing near affordable transportation service is critical to reducing the overall cost burden on low-income household budgets. Considerable demand will also come from singles and couples without children with annual incomes of $60,000 to $125,000.10 An economic range of housing choices in TODs – “mixed-income TOD” – is crucial to realizing the full potential of the transit investments being made to provide greater transportation access and housing choice to a full array of home owners and renters. The creation and preservation of mixed-income housing near transit can help local 7

Hollie M. Lund, Robert Cervero, Richard W. Willson, Travel Characteristics of Transit-Oriented Development in California. Caltrans Transportation Grant "Statewide Planning Studies:" 2004 8 Center for Transit-Oriented Development, Hidden in Plain Sight: Capturing the Demand for Housing Near Transit, CTOD: April, 2005 (2030 update, forthcoming Spring 2007). 9 Center for Neighborhood Technology (CNT) and the Center for Transit-Oriented Development, Preserving and Promoting Diverse Transit-Oriented Neighborhoods. CNT: November 2006. 10 For more information on CTOD’s methodology for estimating future demand near transit, see: Center for Transit Oriented Development, Hidden in Plain Sight: Capturing the Demand for Housing Near Transit, April 2005.

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communities respond to the growing demand for housing near transit while also providing economic and environmental benefits to households, cities, and regions. Development of housing adjacent to transit presents opportunities to meaningfully address the nation’s continued need for affordable housing and at the same time to expand access to jobs, educational opportunities and prosperity for a range of income groups. By offering: (1) affordable housing, (2) a stable and reliable base of transit riders, (3) broader access to opportunity and (4) protection from displacement, mixed-income TOD holds the potential to address the problems of worsening traffic congestion, the need for affordable housing in metropolitan areas and the growing gap between lower income and wealthier residents. Several factors make it hard to deliver mixed-income housing adjacent to transit. Lack of ready-to-develop land, high land costs near transit, absence of TODsupportive land use and rigid parking requirements, and lengthy entitlement processes for development all combine to push private sector developers to the high end of the housing market where there is more margin to absorb the time, uncertainty and cost of risk inherent in TOD. Without a more focused concentration on making it easier for development to occur near transit and creating tools and incentives for affordable housing, there is the potential for TOD development to be unaffordable to lower income households, to displace existing residents or to upset the balance of what are presently diverse mixed-income neighborhoods.

Study Purpose This report is jointly sponsored by the U.S. Department of Housing and Urban Development, Office of Policy Research and Development (HUD) and the U.S. Department of Transportation, Federal Transit Administration (FTA). HUD is participating in the research to support its mission of increasing the availability and effectiveness of affordable and mixed-income housing. FTA is participating in this research to support its mission to provide mobility to economically disadvantaged and transit-dependent populations. FTA and HUD undertook this particular research in part to follow-on from a previous report, “Hidden in Plain Sight: Capturing the Demand for Housing Near Transit.” That report indicated that demographic shifts and urban development would increase the demand for housing near transit over the next 20 years. Since affordable housing meets its objectives more effectively when it is well-served by public transit, this follow-on study sought to identify the factors that help, or hinder, the co-location of affordable and mixed income housing with public transit, in the larger context of a new product in the development market – Transit-Oriented Development, or TOD. FTA and HUD initiated a cooperative agreement with Reconnecting America’s Center for Transit-Oriented Development (CTOD) to research this subject by studying five case study cities. It is HUD and FTA's intent for these case studies to 3

provide examples and lessons learned to assist State and local governments as they plan and make local decisions about housing and transportation. It is our belief that by encouraging coordinated planning of affordable and mixed-income housing and public transit investments we can achieve multiple goals of improving transit service to economically disadvantaged persons while enhancing their ability to find affordable housing that does not raise their cost of travel. This study seeks to identify how to strengthen the interplay between affordable housing and TOD, with an emphasis on demand by different household types and income levels. It provides a set of recommendations to Federal, State and local policy makers and practitioners for enhanced coordination of housing goals with transit investments. The majority of the report focuses on the different approaches being developed and implemented in five metropolitan areas of the United States: Boston, Charlotte, Denver, Minneapolis-St. Paul and Portland, Oregon. Each of these regions represents a different phase of development, transit technology, and regulatory frameworks for addressing housing and TOD. Appendix A of this report provides a matrix of general affordable housing and transitoriented development tools being used by many local communities. They include local, regional, State and Federal incentives, policies and programs such as waiving of development fees for affordable housing near transit, density bonuses in exchange for providing a certain number or percentage of affordable housing units, and provision of public resources for affordable housing. While there are significant variations between the case study regions, similarities remain. Each region is characterized as a “hot housing market” in that rising home prices are outpacing increases in household incomes and affordability pressures are confronting both low- and middle-income households. And, all regions are seeking to make increased investments in fixed-guideway transit and promoting transitoriented development either directly through public agencies or in partnership with the private sector. Chapter Two describes the growing demand for housing near transit, and the potential to focus a segment of the growing TOD market to create housing for households at all levels of the economic spectrum. Creating “mixed-income housing near transit” can be a tool for addressing regional affordable housing and transit ridership goals. Chapter Three provides an overview of the five selected regions, describing key housing and transportation trends including housing costs, transit usage and transit system size. Chapters Four through Eight each discuss one of the case study regions. These chapters provide greater detail on regional housing and transit trends, with a particular focus on the selected transit corridor for each case study: demographic composition, land use characteristics, transit status, and the redevelopment potential that exists for providing and retaining housing. Local, regional and State-level policies and tools for promoting transit-oriented development and affordable housing, unique to each region, are described in terms of their application along the 4

corridor. Appendix B provides information on the methodology used in this study for determining underutilized parcels and capacity for new housing within each transit corridor. Key findings and recommendations from the case studies are summarized in Chapter Nine, with overall recommendations for local, regional, State and Federal partners discussed in Chapter Ten.

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